3/27/2009 @ 3:30PM

Street Runs Out Of Steam

A nearly three-week rally that had stocks leaping off multi-year lows was exhausted Friday, as investors scooped out profits and sent the major U.S. averages careening lower.

There appeared to be little impetus for a sell-off, as a lukewarm report on personal income and spending was mostly in line with expectations and tempered by a modest upward revision in the University of Michigan’s latest reading on consumer sentiment. (See “Consumers Cling To Hope.”)

Since the economic data were mild, it appeared Friday’s stumble was more a product of market fatigue than any negative or pessimistic attitude from investors. The S&P 500 dropped 14 points, or 1.7%, to 819; the Dow Jones industrial average fell 138 points, or 1.7%, to 7,787; and the Nasdaq lost 33 points, or 2.1%, to 1,554. Even with the declines the market was in line for its third straight positive week.

KB Home
put a shadow back on housing, after unexpected February upticks in new and existing home sales had given rise to optimism for the market. After reporting a narrower than expected first-quarter loss of 75 cents a share, KB Home Chief Executive
Jeffrey
Mezger
Jeffrey Mezger
cautioned that there will likely be “no meaningful improvement in market conditions for the remainder of this year.” Despite the warning, KB Home shares were up 85 cents, or 6.0%, to $15.01.

Investors were cautious with financial stocks, after chief executives from many of the nation’s largest banks met with President Obama to discuss the government’s strategy to revive the ailing sector. There has been plenty of chatter in recent days about firms like Bank of Ameirca,
JPMorgan Chase
and
Goldman Sachs
paying back federal loans sooner rather than later, and on Monday Treasury Secretary Tim Geithner detailed his plan for a public-private partnership to unload toxic assets off bank balance sheets. (See “Geithner’s Bank Plan: Winners And Losers.”)

General Motors
was among only three advancing stocks on the Dow, after reports said the government may push back its decision on whether the automaker’s restructuring plan is satisfactory by 30 days. That move, which would extend the deadline from March 31, could give GM time to wring concessions out of the United Auto Workers or bondholders. The Detroit car company said Thursday that 7,500 union workers had taken its latest buyout offer. Shares of GM were up 20 cents, or 5.9%, to $3.61.

The technology sector paused, after pacing Thursday’s advance.
Google
said it will cut 200 sales and marketing jobs, the latest indication that even the best-performing companies are impacted by the recession. Shares of Google were down $5.90, or 1.7%, to $347.39; while online retailer
Amazon.com
lost $3.25, or 4.4%, to $70.44, after announcing the closure of three distribution centers. Amazon said 210 employees will be given severance pay and the opportunity to transfer to other warehouses.